With Nat. GAS GOING up and up, does this mean companies will open up Wells and pump more or does that have any effect on anything really. To me if natural gas goes up , us as royalty owners make more $$$$ curious if that is in lamest terms how it works.
The answer depends upon your operator and their corporate strategy and contracts. Some companies have locked in long term contracts with transmission companies and will be bound by those. Other companies have hedged their gas prices and are bound by the hedges. Other companies have free market conditions. Companies look at more than one well and will manage the volumes to meet their corporate strategies across many fields.
Most all wells are producing all they can but rising prices means more revenue & higher winter heating bills too.
I remember my Dad responding to people saying what will you do when gasoline reaches 2 bucks a gallon. He said laugh all the way to the bank. I love higher energy prices, just like farmers love higher corn prices. I sell so much more gas & oil that I consume.
So far this year I’ve seen very mixed results in Kansas. 2020 production was down pretty much across the board. While some leases are back to pre-CoVID production levels, many have yet to recover.
I recently inquired about a few wells that I own interest in that have been shut in for 2 years now. The operator consistently referred to them as “high operating cost” wells. Apparently $6 Nat Gas isn’t getting them too excited about repairing the wells and putting them back online.
I really expected with higher prices that more wells would get repaired and production increased far more than I’ve seen in the current production figures. After two dismal years, I think operators are simply booking some profits and letting things play out before spending a lot of money.
K- Remember that a whole bunch of companies when under with prices last year. Your last sentence is probably part of the equation. Additionally, if the well is a pig, $6 gas is nothing more than lipstick.
$5 gas is gratifying to royalty owners, but will not lead to a drilling boom of new wells. Publicly traded E&P companies unanimously pledge capital discipline and modest single-digit CapEx growth. The private equity companies will drill more aggressively.
Many believe gas prices will remain high & higher, after six years of depression. In the US, environmentalists have blocked most new pipelines from the prolific Marcellus shale, which will help gas prices in TX & OK. President Biden’s moratorium on federal drilling was ruled unlawful, but federal bureaucrats still possess the ability to curtail federal permits in myriad ways behind the curtain.
$10 gas is unlikely for sustained periods, Russia will increase exports to Europe & California, Qatar is developing LNG exports, US environmentalists will try to block new LNG terminals in this country.
Will be fascinating to see if Apache restarts Alpine High in Reeves County TX, Apache pulled the plug in Feb-2020 with a $3.2 billion writeoff, that field produced too much gas & NGL.